The Carly Chronicles

An Inside Look at Her Campaign to Reinvent HP

"Someday, there will be books written about what we're doing, Carly Fiorina declared in 1999. She had just joined Hewlett-Packard as its new chief executive, the first outsider ever chosen to run the high-tech giant, the highest-profile female CEO in the United States. Her strategic and operational mandate: to breathe new life into a proud but aging company and to successfully execute one of the most audacious business transformations of all time. Over the past few years, Fiorina's tenure at HP has become a case study in more ways than she ever expected. Early on, the new boss seemed to be conducting a master class in leadership, winning allies and taking steps that made HP nimbler, leaner, and more exciting. Then the economy turned south, and some of her boldest bets misfired. She was held up as a paragon again, this time of hubris and insensitivity to the company's deep-seated culture. Then she masterminded HP's $20 billion acquisition of arch rival Compaq Computer Corp. in the face of fierce resistance, a strategic move that was packed with lessons about crisis management and the changing future of the high-tech sector. All along the way, Fiorina has sat in the celebrity-CEO chair, competing in a high-stakes industry, leading a time-honored company, working in the intense environment of Silicon Valley -- and doing it all with the added scrutiny that comes with being a woman at the top.

In Perfect Enough: Carly Fiorina and the Reinvention of Hewlett-Packard (Portfolio, 2003), Fast Company senior editor George Anders pieces together the full story of Fiorina's epic struggle to navigate HP toward a viable new future without renouncing its storied past. This excerpt presents five crucial scenes along the way, dramatic moments that illuminate both the challenge that Fiorina has faced and her approach to tackling the task. The story begins with an inside look at Fiorina's candidacy for the job and culminates with her candid views on the tech sector in the years to come.

Carly Wins the Job
In October 1998, a burst of publicity made Carly Fiorina a prime candidate for a CEO job. She was a top executive in the telecom industry then and one of the new faces of female leadership in the United States. Her boss, Lucent Technologies chairman Henry Schacht, offered her some pragmatic advice about recruiters' calls. "It's not disloyal to think about alternatives," Schacht said. "But you owe it to yourself -- and to our company -- not to get distracted by the wrong kinds of offers. Decide very clearly what you would pay attention to. Don't talk to people about anything less."

Over the next seven months, Fiorina ignored a drumbeat of recruiters' pitches, tossing their message slips into the garbage. Finally, a persistent caller reached her office line in the evening, after all of the secretaries had gone home, with a breathless message: "Hi, this is Jeff Christian. Don't hang up. I'm calling about Hewlett-Packard." Fiorina paused. She savored his opening line for a moment. Then she said, "Well! You've got my attention."

A few days later, Fiorina and Christian lunched at a back table in an obscure New Jersey Hilton, seeking to avoid attention. Christian was in the early stages of screening 100 candidates for HP's board as it sought to pick outgoing CEO Lewis Platt's replacement, and he wanted to hear about each one's career challenges and triumphs. Whenever candidates abandoned their corner-office reserve and began telling rich, dramatic stories from the heart, Christian knew that the allure of a new job was magically taking hold. Partway through the meal, Fiorina entered that zone.

"What struck me," says Christian, "was that in her career, she constantly had been sent into troubled situations. And at every junc- ture except one (a Lucent-Philips joint venture to make telephone handsets), she had been able to fix things. She had a methodology. She would go into an area and spend a lot of time listening at first. She was a big believer that organizations already contained a lot of the right ideas. People just didn't feel as though they had the authority to get them done."

Two months later, Fiorina emerged as one of four finalists for the job. The crucial interview would be with Richard Hackborn, a key director and retired HP executive who had built the company's enormously successful printer business. They met at Chicago's O'Hare Airport, at a restaurant decorated like an imitation speak-easy. Within minutes, they were talking about HP more bluntly and more affectionately than either had expected.

Hackborn guided Fiorina through HP's business challenges that needed fixing: The personal-computing division was acting as if fast-charging rival Dell Computer Corp. didn't exist. The sales force was tripping over itself. The company was losing ground to younger rivals, such as Dell, Lexmark, and Sun Microsystems, which irked Hackborn greatly. "We're in danger of losing everything that made this company great," he said. Fiorina listened carefully and explained her work at Lucent, where she had built an industry-leading sales force. She had come to the lunch regarding Hackborn as the company's Yoda: the elder figure of supreme respect and the true decision maker in the search for HP's new CEO.

Several hours into the meeting, Fiorina began speculating about who should be chairman if she became CEO. She wanted some wise-uncle support early on. Departing CEO Platt had signaled his desire to remain chairman, and she thought he could help. But she quickly realized that Hackborn didn't like that idea. At that moment, an idea popped into her mind. Looking at Hackborn, other people might have seen a wrinkled retiree with sunken eyes and white hair. She saw something different: a special counselor. Rather than get tangled up in a Platt conversation, she looked at Hackborn and said, "Actually, Dick, I think you ought to be chairman."

The idea startled Hackborn. He had been seeking to wind down his commitments to HP. But as he and Fiorina continued talking, he warmed to the idea. When their meeting ended and Fiorina headed toward her plane, she told herself, "I've got him hooked!"

Soon afterward, Hackborn briefed the entire HP board on his chat with Fiorina. "I could see he was dazzled by her," fellow director Patricia C. Dunn recalls. "He was really excited about her vision for the company. She had a feel for the company's strengths and weaknesses. It corresponded with his feel." Hackborn expressed mild concern about Fiorina's lack of a technical background, but that wasn't a top-priority worry for him. "We may be getting one of the top two or three CEOs of our generation," Hackborn declared. "She could be the next Jack Welch."

Carly Goes Back to the Garage...Sort of
Once she took office at HP, Fiorina followed the newcomer's creed that had served her well for more than a decade. She hunted for good ideas buried in the bureaucracy while identifying inane practices that could be stopped right away. She declared war on brand clutter, pointing out that a profusion of minor brand names -- Chai, Tape Alert, Vectra -- was confusing customers and weakening what should be the best brand name of all: Hewlett-Packard.

Fiorina quickly identified her rallying point: the original Palo Alto garage where Bill Hewlett and Dave Packard founded the company in 1939. To change HP's culture, "we had to go back to the roots of the place," she later said. She engaged a local ad agency, Goodby, Silverstein & Partners, to reposition HP to the world. Goodby creative manager Steven Simpson sat down with Packard's autobiography, The HP Way, and, working from the text, produced a manifesto that he called "Rules of the Garage." It contained 10 maxims that had guided the men who had built the early oscillators, voltmeters, and atomic clocks of the 1930s, 1940s, and 1950s. "Perform more than you promised," Simpson wrote. "If the person at the next bench sees what you're working on and doesn't say, 'Wow!' start over." He arranged the rules in front of a photo of the original garage and sent his draft to the company for review.

Fiorina loved the concept. But she and Susan Bowick, HP's head of human resources, decided the draft rules didn't capture the company's current direction. Soon the allusions to next-bench engineers and topflight performance had disappeared. Newly coined rules had taken their place, notably "The customer defines a job well done" and "Invent different ways of working."

More rejiggering lay ahead. Goodby and HP executives wanted to showcase the garage in HP's new television commercials, but Packard's old house had changed hands multiple times, and the shed in back was being leased for $100 a month by a florist. So the ad team picked out a back corner of HP's corporate campus and built an ersatz garage. The lawn in front of the building was made to look like a rutted driveway. Sport-utility vehicles rumbled back and forth until they wore down a 100-foot stretch of grass. Ad-agency camera crews arrived and ultimately produced a dazzling commercial with Fiorina herself telling people, "The company of Bill Hewlett and Dave Packard is being reinvented. The original startup will act like one again. Watch!"

By crafting the garage commercial as she did, Fiorina was turning HP's heritage into a fable. The ad included black-and-white footage from the '30s, shared by the Packard family. But as Fiorina stood in front of the faux garage, HP's birthplace was becoming something akin to Abe Lincoln's log cabin. Reality and imagination now blurred together. If HP could redefine itself faster by taking liberties with its own history, well, so be it. Everyone involved in the "Rules of the Garage" project nudged Fiorina that way. The rules didn't need to be literal precepts from Packard's writings. As the company's chief mythmaker, Fiorina now possessed extra-ordinary powers. It was up to her to use them wisely.

Carly Meets the System
Less than a month into her new job, Fiorina held an off-site at the Seascape Resort, near Monterey, California, where she argued for greater centralization. "We aren't growing fast enough," she declared. "We aren't profitable enough." Unconnected divisions were driving customers crazy. Ford Motor Co. and Boeing were grumbling that HP pestered them with dozens of separate sales teams, each pushing a narrow line of products rather than addressing their total needs. HP's executives were saying that various operating units had great potential to help one another, but it just wasn't happening. "We're leaving diamonds on the floor," she declared.

As a remedy, Fiorina borrowed a page from her Lucent playbook. Instead of letting each division handle its own research, manufacturing, sales, and marketing, she decided to reorganize HP into quadrants. Two vast sales-and-marketing groups -- known as the "front end" -- would take command of customer relationships. One group would talk to mass-market consumers; the other would focus on the Fords and Boeings of the world. Meanwhile, the research and manufacturing for all of HP's products would be redefined as the "back end." That would be split in two as well, with printing and imaging making up one-half, and all of the computer initiatives the other half.

Those ideas looked great on a whiteboard, but some sub-ordinates shuddered. "I was a deer caught in the headlights when she described the front and back end," the longtime head of laser printing, Carolyn Ticknor, remarked in mid-2000. Before long, it emerged that HP couldn't precisely allocate costs between the front end and back end. As a result, some salespeople raced to beat quotas, only to saddle the company with unprofitable orders. Fiorina retooled her system to meet employees' concerns. She was right that HP needed to show a better face to its customers. She was wrong to think she could transform a company so rapidly without creating new snarls.

Fiorina was running into the hardest challenge of all: the inevitable tug-of-war between a radical new CEO and a skeptical workforce. Mid-level managers and rank-and-file employees didn't openly attack her new ideas. They just meandered around them. In public forums, Fiorina appeared to win support. Then managers huddled privately to decide whether they liked what they heard. They softened goals, adjusted timetables, made some exceptions. By the time they were finished, they had gutted whatever it was that Fiorina was trying to achieve. Resistance was so subtle and pervasive that she couldn't accomplish anything by getting angry. There was no obvious opponent. It was just the system.

Carly Finds Her Voice
In mid-2001, Fiorina and HP's directors bet everything on a giant merger with Compaq. The deal was supposed to shore up both companies' computer operations, permit major cost cutting, and give the combined enterprise a better shot at competing against IBM. Everything had seemed logical in the summer's secret boardroom negotiations. But once the acquisition plan became public, shareholders, employees, and customers balked. Fiorina was a chief executive in peril. Her early efforts to win supporters misfired badly.

What Fiorina really wanted was to change the conversation, infusing audiences with her conviction that HP could be a stronger, bolder company by acquiring Compaq. She needed to win loyalty with a vision of better times ahead. When fellow director Walter Hewlett -- the oldest son of company cofounder Bill Hewlett -- announced his opposition to the deal, Fiorina found her voice.

She recast herself as a brave woman, alone on a podium, crusad-ing for the dreams and aspirations of her entire company. If people thought she was vulnerable, all right, she was. Before her opponents fully realized what had transpired, she had turned that appearance of vulnerability into her greatest asset. In a major speech, she declared, "To the skeptics who say it won't work, it won't sell, it won't succeed, it's not the HP Way, I say, 'You don't know the people of the new HP.' "

In her most audacious move, Fiorina began invoking the early careers of Hewlett and Packard as justification for the HP-Compaq merger. With the late founders' heirs strongly opposed to the merger, it seemed mind-boggling that she could lay claim to the patriarchs' intentions. She latched onto a legendary Packard quote -- "To remain static is to lose ground" -- and made it the centerpiece of two-page newspaper ads. And not only did she appropriate the founders' language for her cause, but she also scripted dialogue for them, using her new ideas for the company as their text. Fiorina created plausible -- but unsubstantiated -- conversations from long ago, in which the founders spoke her language. Her tactics infuriated Packard's son, David Woodley Packard, but she didn't back down. She had framed her message.

Carly Asks Three Questions
By late 2001, the HP-Compaq merger seemed doomed. The foundations aligned with the Hewlett and Packard families both opposed the deal. During her first two years on the job, though, Fiorina had cemented superb relations with all nonexecutive directors on her board except Walter Hewlett. These board members regarded her as their instrument, charging into work to make HP a more modern business. No matter how bleak it looked outside the boardroom, Fiorina believed that she could draw strength from her directors and ultimately prevail.

A key moment came on Sunday, December 9. Fiorina sat in a small, first-floor study in her home and began a conference call with a half-dozen directors, led by Hackborn. Fiorina didn't plead for their support. Instead, she did something both innocent and ingenious. She asked each board member to give her a yes or no answer to three questions: Should we stop? Should we go on as is? Or should we go on in a modified way?

Decisive answers came back, almost in unison. "We're going on!" the directors told Fiorina. No one was more adamant than Dick Hackborn. "Let's get back to the question, 'Why are we proposing this in the first place?' " he remarked. His answer: "It's the best solution for fixing the whole computer business." By the end of the call, the directors were so confident in what they were all doing that they could afford to worry about Fiorina's well-being. They asked if she felt comfortable proceeding in what would surely be a long struggle. When she said yes, the board's support was sealed.

Carly Carries On
Last spring, the HP-Compaq transaction finally won shareholder approval by a razor-thin margin and withstood a court challenge, giving Fiorina her long-awaited chance to reshape HP. She now runs one of the world's largest enterprises, with at least $70 billion a year in revenue and the number-one position in a half-dozen key markets. HP can bulldoze its way past smaller rivals, simply because it has more salespeople, more advertising dollars, and more reinforcement from consultants and friendly third-party vendors. The company can win just by showing up. Fiorina had played that game effectively at Lucent; now she could do the same at HP.

What's more, the Compaq acquisition brought 65,000 fresh faces into the company. Most of those employees didn't mind redefining HP Carly's way. They had job-hopped already; they were comfortable settling into new assignments and getting the job done, without agonizing over each cultural adjustment. As Fiorina acknowledged soon after the deal became effective, "part of what we've done in the merger is inject new DNA."

Yet winning the battle to acquire Compaq had exacted a toll on Fiorina. In the new organization, she found herself straining to update her own leadership style to the demands of the job. She wasn't the fast-paced outsider anymore, or the daring rebel. She had become the face of established authority. In her first three years at HP, Fiorina had been a strategic whirlwind, creating most of the opportunities and the problems that she now faced. In her fourth year, it was time to repair her own mistakes and exhibit the day-by-day precision of a skilled operating executive.

"I always thought it would be nice if Carly gathered some scar tissue," says Richard Munro, the retired chairman of Time Inc. He had seen her swagger earlier in her career, when they were outside directors of Kellogg, the Michigan-based cereal company. Now, Munro welcomed Fiorina's newfound caution. "She had overwhelming self-confidence then, and she was probably right most of the time," he recalls. "But she had a sharp edge. When she got to Kellogg, I said to myself, 'Someday, Carly, you're going to get yours. You'll encounter the same frustrations that all the rest of us face. And if you're lucky, it will make you a better person.' "

Given enough time, Fiorina believed, she could fix everything. HP's earnings and stock price were down since her arrival, but that was true of almost every high-tech company. She was withstanding the industry slump better than most. In the abstract, founders Hewlett and Packard were still her heroes. But after the HP-Compaq merger battle subsided, she largely stopped talking about the founders. It was as if she had put them back on the mantelpiece, protected with dust covers. Instead, she cited two different companies, unbidden, as examples of enterprises that got it right. They were Microsoft and IBM, the powerful pragmatists.

"Technology is more than an engineer's game," Fiorina remarked. "That's where Microsoft has been brilliant. If you think about technology companies that have really led, they didn't fall too much in love with the technology." Someday, she believed, the rest of Silicon Valley would understand.

Fast Company senior editor George Anders (ganders@fastcompany.com) is the author of two previous books, Merchants of Debt (BasicBooks, 1992) and Health Against Wealth (Houghton Mifflin, 1996).

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